Real estate financing speeds up, and supervision once again cools down

What signal did the two ministries and commissions release from the housing and enterprise forum?

  As housing prices in some cities are rising and the pace of financing by housing companies is accelerating, supervision has once again taken measures to "cool down." According to news from the official website of the central bank on August 23, on August 20, the Ministry of Housing, Urban-Rural and Construction and the Central Bank held a symposium on key real estate companies in Beijing to study the further implementation of a long-term real estate mechanism. The Central Bank, the Ministry of Housing, Urban-Rural Development, and the Ministry of Construction, together with relevant departments, have formulated the rules for capital monitoring and financing management of key real estate companies based on extensive consultations in the early stage.

  "The symposium mainly involved the financing of some real estate companies, and also mentioned the stability of policy regulation. The purpose of regulation is the health and stability of the real estate market. The financing blowout of real estate companies is the main reason for the increase in financing rules to avoid excessive financing by real estate companies. There are financial risks.” Zhang Dawei, chief analyst of Centaline Property, said in an analysis.

Subject

Two ministries hold a symposium on key real estate companies

Reiterate that "housing is not speculation"

  The meeting held that since the 19th National Congress of the Communist Party of China, relevant departments and localities have implemented the decisions and arrangements of the Party Central Committee and the State Council, insisted on the positioning of houses for living, not for speculation, and insisted on not using real estate as a short-term economic stimulus. The main responsibility of the city is to stabilize land prices, house prices, and expectations, maintain the continuity and stability of real estate control policies, and steadily implement the real estate long-term mechanism. The real estate market has maintained a stable and healthy development.

  Since the first proposal of "housing to live without speculation" in 2016, the real estate market has been focusing on this theme. Since the outbreak of the epidemic, "whether real estate should be used as a means to stimulate economic recovery" has become the focus of public opinion. However, the Politburo meetings held in April and at the end of July this year reiterated the tone of “no speculation in housing and housing”, and the real estate work symposium held on July 24 clearly stated that real estate should not be used as a short-term means of stimulating the economy. Land prices, house prices, and expectations are stabilized, and policies are implemented for each city, and one policy for each city. Since July this year, more than 10 cities including Shenzhen and Hangzhou have introduced tightening policies for the property market.

  The meeting emphasized that market-oriented, regular, and transparent financing rules are conducive to the formation of stable financial policy expectations for real estate companies, rational arrangements for business activities and financing behaviors, and enhancement of their own anti-risk capabilities, which are also conducive to promoting the long-term and stable operation of the real estate industry. Prevent and resolve real estate financial risks, and promote the sustained, stable and healthy development of the real estate market.

the reason

Why did the supervision move again at this time?

Accelerated housing financing + active land market

  Regarding the background of this meeting, Zhang Dawei believes that the blowout of real estate financing is the main reason for the increase in financing rules to avoid excessive financing of real estate companies and financial risks.

  Statistics from the Centaline Real Estate Research Center show that in mid-to-early August, the scale of issuance of credit bonds in the real estate industry reached 26.1 billion, a high level during the year. During the year, real estate companies had issued a total of 811 bonds, with a total financing amount of 624.2 billion. "Especially in recent days, real estate companies have intensively released large-scale financing. Overall, since July, real estate financing has set a new historical record for the same period." Zhang Dawei said.

  He further said that from the overall data, real estate companies are worried about sales pressure and increase investment in financing. Although overseas financing has tightened, domestic financing has recently been significantly liberalized. In July, housing companies raised more than 70 billion yuan in a single month, and there was a trend of lower interest rates and an increase in the number. From the perspective of real estate financing, more and more domestic financing is being emphasized.

  Sun Binbin, chief fixed-income analyst at Tianfeng Securities, also said that with the economic recovery, housing prices in first-tier cities and some hot second-tier cities have recently seen an upward trend, while the land market continues to be active. This shows that it may further stimulate the expectation of rising housing prices. The rapid recovery of real estate sales has driven residents' mid- to long-term credit to continue to increase on a large scale, and the problem of excessive occupation of financial resources by real estate may once again cause concern.

influences

What is the impact on real estate companies?

Not to suppress, hope to regulate industry development from the perspective of financing

  Before the announcement of the content of this meeting, the market had reported that "new financing regulations for real estate companies were released" and "some real estate companies were interviewed".

  According to the 21st Century Business Herald, real estate companies will face the "three red lines" of financing. Regulatory authorities have introduced new regulations to control the growth of interest-bearing debt of real estate companies and set up "three red lines". Specifically, red line 1: the debt-to-asset ratio after excluding advance receipts is greater than 70%; red line 2: net debt ratio is greater than 100%; red line 3: cash short-term debt ratio is less than 1 time. According to the situation of the "three red lines", the real estate companies are divided into four levels of "red, orange, yellow, and green". Taking the scale of interest-bearing liabilities as the objective of financing management operations, the grading is set as the threshold for the growth rate of the scale of interest-bearing liabilities.

  A brokerage person told the Shell Finance reporter that he had heard of the news but did not see the original documents. A leading real estate company said, “The policy itself has communicated with us, it is more continuous, not sudden.”

  However, some people in the industry have questioned the rules, "The three red lines rumored in the market are obviously detrimental to stable financing companies, and their authenticity may not be large. On the whole, real estate financing is still at a high level, and the market is mainly stable." The person said .

  The meeting mentioned financing rules, but no detailed description. According to the announcement, in order to further implement the real estate long-term mechanism, implement the real estate financial prudential management system, and enhance the marketization, regularization and transparency of real estate enterprise financing, the People's Bank of China, the Ministry of Housing, Urban-Rural Development and the Ministry of Housing and Urban-Rural Development and related departments are the basis for extensive consultation in the early stage On the above, the fund monitoring and financing management rules for key real estate enterprises have been formed.

  Yan Yuejin, research director of the Think Tank Center of E-House Research Institute, said that the core point of this meeting was that the long-term mechanism was discussed from the perspective of real estate companies for the first time, so that the work of the long-term mechanism would be fuller, including the market, supervision and enterprises. So this is not simply to suppress developers, but more to regulate the future financing and development of developers from a financing perspective. Of course, the meeting continued to emphasize content such as stabilizing land prices, which will still help stabilize the subsequent land acquisition by real estate companies.

  Zhang Dawei said that the content of the meeting only mentioned the capital monitoring and financing management rules of key real estate companies. The impact of implementation needs to be observed. On the one hand, which housing companies are in the policy focus, and the specific content of financing management rules have not been disclosed for the time being. Because of the non-industry supervision, there is a possibility of more cooperation between real estate companies. On the whole, the impact of policies should be judged based on the formulation and implementation of specific regulations.

  According to the announcement of the central bank, the meeting also conducted research on improving the financial support policy system for the housing leasing market, and accelerating the formation of a housing system of "simultaneous rent and purchase". The heads of relevant departments such as the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the Foreign Exchange Bureau, the Association of Dealers, and some real estate companies attended the meeting.

  Cheng Weimiao, Shell Financial Reporter, Beijing News